Ackman targets retail investors in ADP proxy contest

BOSTON (Reuters) - Billionaire hedge fund manager William Ackman, whose firm owns an 8.3 percent stake in Automatic Data Processing Inc (ADP.O), is turning up the heat in his proxy war for the human resources outsourcing company by targeting an often-ignored but influential group of people - retail investors.

William 'Bill' Ackman, CEO and Portfolio Manager of Pershing Square Capital Management, speaks during the Sohn Investment Conference in New York City, U.S., May 8, 2017. REUTERS/Brendan McDermid

The activist investor who spends much of his time meeting institutional shareholders in Wall Street boardrooms is now speaking directly to the Main Street investor through video, telephone and television as his proxy fight with ADP intensifies before the company’s annual meeting on Nov. 7.

Ackman, 51, began voicing his criticisms of ADP’s performance in late August.

Now, his campaign to get himself and two other nominees associated with his Pershing Square Capital Management hedge fund elected to the ADP board is taking a tack seldom seen in proxy contests: speaking to the company’s retail investors to win their votes.

Individual shareholders hold 28 percent of ADP shares while Ackman’s Pershing Square Capital Management has an 8.3 percent stake of which only 2 percent is in common stock. Ackman’s firm will be able to vote only the shares of common stock.

Ackman, known for his presentations of 100-plus pages and hours-long conference calls with analysts, will soon let retail investors who own as little as one share in ADP ask him anything they want. He is planning a conference call on a weekday evening at 8 p.m. that will last as long as it takes, he said. A date has not been set.

The usual method of dissident investors like Ackman is only to send letters to retail investors, which often end up in the trash.

Earlier on Wednesday, Ackman released a video telling retail investors they hold the key to ADP's future and should send management a message at the November meeting that the status quo is no longer acceptable. (here)

Ackman in the video describes the company as a great business but one that is underperforming. He said he wants average investors to decide whether a large hedge fund manager like himself would add expertise in the boardroom.

TAKING TO THE AIRWAVES

ADP has rejected all of Ackman’s critiques and said it does not need his help

“ADP’s Board is concerned that Pershing Square’s extreme, swing-for-the-fences proposals and unqualified nominees would disrupt client services and damage relationships, putting ADP – and the value of shareholders’ investments – at significant risk,” a spokeswoman said on Wednesday.

Ackman has also taken to the airwaves, appearing on business channel CNBC’s noontime show and with plans to appear on Jim Cramer’s “Mad Money” show which is aimed at mom-and-pop investors.

Proxy contests are traditionally decided by institutional investors like Vanguard, BlackRock and State Street with activists like Ackman making their cases behind closed doors.

These three mutual fund firms are also the top investors in ADP and Ackman is also appealing to them to vote for him. Some have told him they would like the two sides to iron out their differences.

Ackman will also visit proxy voting advisory firm ISS before it makes recommendations on how institutional shareholders may want to vote.

But retail shareholders, often ignored in proxy contests because they traditionally back management or do not bother to vote at all, are now featuring prominently in a number of boardroom battles this year.

Billionaire activist investor Nelson Peltz is reaching out to them as part of his campaign to shake up consumer products company Procter & Gamble Co (PG.N).

Similarly, Ackman - who has both won and lost big proxy contests - needs the retail-investor vote at this time.

As the proxy contest has gained steam, a war of words is taking hold and Ackman is trying to change the narrative. ADP’s CEO, Carlos Rodriguez, in mid-August referred to Ackman as a “spoiled brat” in a CNBC interview. Ackman later said this upset his mother, who did not raise him as that.

While Ackman’s fund is losing money this year, he has earned an average 10.6 percent a year over the life of the fund.

Ackman said on Wednesday that to set the record straight, he does not want to control ADP. Rather, he thinks the company - whose shares have gained 22 percent in the last year - can perform better.

Reporting by Svea Herbst-Bayliss in Boston; Editing by Carmel Crimmins and Matthew Lewis